Growing up, Blockbuster was the place to go to get videos. When I was a kid, we’d drive down to the now-shuttered big, bright corner store in Santa Monica to pick out movies to watch. Later, in college, I patronized Berkeley’s local indie shop Reel Video (also now defunct) on the rare occasions that I wanted to rent something. But by my junior year in college (2003), I—along with millions of Americans—discovered Netflix, and happily devoured as many films as I could.

In other words, I pretty much haven’t thought about Blockbuster in well over a decade—and yet, the tenacious company is still out there. (There’s one just around the corner from me in Oakland!) Oh, how the mighty have fallen.

It was just a year ago that Blockbuster announced it would be offering a mailed DVD and streaming movie service (yes, à la Netflix) as a way to go head-to-head with the California company that has re-defined how we consume TV and movies.

Blockbuster lost $13 million last quarter

When Blockbuster declared bankruptcy in 2010, Dish Network swooped in within a year to acquire the video rental chain for $320 million. The plan was that by using the footprint of those stores, Dish could sell mobile devices to stream Blockbuster movies. But the Federal Communications Commission has been taking longer than expected in deciding whether Dish should be allowed to use its satellite spectrum for that purpose.

“You make a lot of mistakes in business,” Ergen, Dish’s founder and chairman, told Bloomberg, in an Oct. 3 interview. “I don’t think Blockbuster is going to be a mistake, but it’s unclear if that’s going to be a transformative decision.”

In the company’s most recent earnings report, Dish reported that Blockbuster lost $13 million in the second quarter of 2012, a loss that was attributed to “a result of lower monthly revenue and higher inventory costs per unit relative to the fair value of the inventory costs per unit acquired in the Blockbuster Acquisition.”

In short, Blockbuster isn’t making money. (Surprise!) To add insult to injury, Dish is also currently facing three patent infringement lawsuits against Blockbuster.

The slow, decade-long decline

Long before the bankruptcy, Blockbuster had been struggling to regain its footing. It launched its own Netflix-style clone in 2004. It got hit with a lawsuit by Netflix in 2006 (they settled a year later). More recently, Redbox and Verizon teamed up to go against the big yellow giant.

Dish has already begun closing stores—the company says it still has around 900 stores, which is of course a far cry from the 9,000 stores the company had in 2004. So, as a result of the federal regulatory delay, Ergen told Bloomberg that he’s reconsidering that entire plan.

“When your lease runs out on the stores, you can’t re-up because you can’t make enough money from just selling DVDs,” Ergen said.

The founder also said that buying Blockbuster was originally not very risky. The worst-case plan, he said, was to simply liquidate the company. When Blockbuster was acquired, it had $100 million on hand, and 1,700 stores. Selling the whole lot, Dish estimated, would yield about $300 million.

“There was very little risk in buying,” Ergen said. “Worst case we break even or make a little bit of money.”

Whether that plan—in late 2012—is still viable, is another question. Meanwhile, I’ve moved on to Hulu and iTunes.

Cyrus Farivar
Cyrus is a Senior Tech Policy Reporter at Ars Technica, and is also a radio producer and author. His latest book, Habeas Data, about the legal cases over the last 50 years that have had an outsized impact on surveillance and privacy law in America, is due out in May 2018 from Melville House. Emailcyrus.farivar@arstechnica.com//Twitter@cfarivar

What has never made sense to me is exactly how a business that charges 1/4 the price of the actual product for the privilege of renting has ever stayed open in the first place. Think about it, a $6 rental is over 1/4th of $20. That would be like paying $6000 a DAY to rent a car that costs $20000. Why haven't people started up video sharing services, where you simply swap your DVD's with other members?

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

Only if they will do rentals for $1 a day or less. Don't forget about Redbox, which seems to have a kiosk on practically every street corner today (at least where I live).

Lucky you. Here in small town America, I gotta drive 30 min. in either direction to find one. Looked at trying to get one in my town once. Was told they wanted something like 15,000 customers per week MINIMUM. That would mean everyone in town AND surrounding townships would have to come to store several times a week...

What started as a great job to have while attending college in 2001, became a horrible place to spend any time by the time I graduated in 2005. I met so many interesting people, watched many entertaining movies, and read many great books (lonely Saturday morning shifts) on the company dime; but by the end it was obvious that they were more interested in their misguided attempts at competing on Netflix's terms than distinguishing themselves by what they already did well. Working at a store in a small college town, we bent the rules as far as we could to make the store successful, only to have "corporate" rain hellfire upon us and doom the store to closure. And now their fate is sealed.

I thought a couple of years ago that the best companies to buy Blockbuster would have been Little Ceasar's or Domino's Pizza. A couple of years ago, getting the movie you want to watch delivered with a pizza would have been great.Probably much too late now. Too bad.

Wife and I considered this a few years ago. Set up a Mom&Pop movie and pizza place. Couldn't come up with money for initial investment though. Still might be viable, but I think the window is closing.

This is the day I knew Blockbuster was doomed. The local store down the street closed ( there is another one within a few miles ) and was running "Closeout Sale". I went in because I was interested in what sort of movies I could find for a low price.

What I found was that Ghostbusters ( 1984 ) was marked for a low low price of $15.99.

A movie that is almost 30 years old was being sold for (almost) MORE money then the Avengers ( 19.99 ) at Walmart.

This was a few months ago and Avengers wasn't being sold, so replace that with any other movie at the time, needless to say I just walked out. They were selling USED ( new releases ) movies for $19.99 along with sealed NEW copies for the same price.

It was a complete Cluster F*** the stupid decisions go all the way to the CEO it seems.

For $15/month ($.50 a day) I get one movie or game out at Blockbuster at a time. So it's just like Netflix or Gamefly, only titles that were released in the past year have less than a 6 month wait. In fact, they're almost always in stock.

Whether it be The Avengers, Darksiders II, Max Payne 3, you name it. You can rent it on release day and keep it as long as you want. I beat Max Payne in a week, so you figure it cost me approximately $2.50 to beat Max Payne, and since there's nothing left after the game is done I returned it. You suckers paid $60 for it. Remember that pile of garbage called Mass Effect 3 that you bought for $60? $5 here...

In addition, I'm convinced that there are many Redbox customers (at least the ones that use my Redbox) who believe a Disc Sander is a DVD/Blu-Ray player. Once they get frustrated with that not working, they return it to Redbox so I can waste my time and money trying to rent it.

Even older movies have an issue. My Coworker has had "The Incredibles" at the top of his Netflix queue since he signed up and it still hasn't shipped. Instead it keeps shipping him #6 and #7.

It's also really easy to play the system at Blockbuster. They typically offer more money than Gamestop for used titles. I've actually gone in to Gamestop for a sale, bought a bunch of used games... then went to Blockbuster and traded them in for a profit.

Blockbuster's lack of popularity has been my goldmine. There are times when I get exchange a movie 3 times in one day just because a bunch of new releases came out I wanted to see. Only on Friday nights do I see empty shelves. Ultimately your loss, not mine.

With Blockbuster gone, I wonder if there's even a niche left for the locally-owned rental stores to fill anymore.

Only if they will do rentals for $1 a day or less. Don't forget about Redbox, which seems to have a kiosk on practically every street corner today (at least where I live).

Lucky you. Here in small town America, I gotta drive 30 min. in either direction to find one. Looked at trying to get one in my town once. Was told they wanted something like 15,000 customers per week MINIMUM. That would mean everyone in town AND surrounding townships would have to come to store several times a week...

Actually their pricing right now is:

$2.99 for Day 1 + $.99/day -- First 3 months (I believe)$1.99 for Day 1 + $.99/day -- Less than a year old$.99 for Day 1 + $.99/day -- A year old or more

But that's just if it's base price. Tuesdays and Wednesdays are Rent 1 Get 1. There's the $15/mo pass I spoke of earlier, and if you have kids it's $5/mo for a Kids Pass.

Blockbuster really is a SEGA. They blow at advertising. I found this stuff out because I frequent the store. If I didn't, I never would've known any of these things.

(Another thing you can't do anymore is rent a movie/game for "5 days" but so long as you kept it for less than 37 days you could return it for a "restocking fee" of $1.25. I don't see why you'd want to do this for movies, but it used to be THE way to rent games. No surprise they got rid of that policy.)

TheDarkerPhantom wrote:

This is the day I knew Blockbuster was doomed. The local store down the street closed ( there is another one within a few miles ) and was running "Closeout Sale". I went in because I was interested in what sort of movies I could find for a low price.

What I found was that Ghostbusters ( 1984 ) was marked for a low low price of $15.99.

A movie that is almost 30 years old was being sold for (almost) MORE money then the Avengers ( 19.99 ) at Walmart.

This was a few months ago and Avengers wasn't being sold, so replace that with any other movie at the time, needless to say I just walked out. They were selling USED ( new releases ) movies for $19.99 along with sealed NEW copies for the same price.

It was a complete Cluster F*** the stupid decisions go all the way to the CEO it seems.

You're actually full of crap. The highest price they have for used titles is $14.99, or 2/$20 (3/$20 during the holidays.) That's not even a "Closeout Sale."

When a local Blockbuster closed near me, Prototype had been out for a little over 2 weeks, and I got it for $6.

I am surprised that others have not mentioned our secret for low cost movie watching (no, not Torrent), the LIBRARY. Ever since our (awesome) local library discovered it could triple its monthly visitor count by stocking an excellent selection of DVDs, we haven't really been tempted to pay for movie rentals.

Occasionally, we'll drop 99c on a Red Box new release that we simple can't wait for the library to stock, but the days of browsing the Blockbuster "New Releases" wall, only to be disappointed at the lack of selection diversity are long gone, but not really missed.

I am surprised that others have not mentioned our secret for low cost movie watching (no, not Torrent), the LIBRARY. Ever since our (awesome) local library discovered it could triple its monthly visitor count by stocking an excellent selection of DVDs, we haven't really been tempted to pay for movie rentals.

Occasionally, we'll drop 99c on a Red Box new release that we simple can't wait for the library to stock, but the days of browsing the Blockbuster "New Releases" wall, only to be disappointed at the lack of selection diversity are long gone, but not really missed.

What is this L.I.B.R.A.R.Y. thing you speak of? They still make those? I love my public library but I feel like most people wouldn't be caught dead setting their foot in one. It helps if you get on good terms with the staff, they've definitely filled a few of my suggestions plus gave me a phone call so I could be the first person to check it out.

It is to society's detriment if we lose our libraries. I LOVE my e-reader, but there are a lot of classical works in all fields that haven't made the jump to digital. Imagine what people are missing out on. And I ain't talk bout Shakespeare either. Classics on ads and advertising, philosophy, history, the works.

It's a little bit sad, but completely expected. Most companies as pervasive as blockbuster was in the 90s tend to make you hate them, but I never hated blockbuster. Sure, their definition of "new release" was always a bit perplexing, but overall they provided a good service. I think that their brand is still going to be worth something as a result.

This is ultimately yet another lesson to all large and pervasive companies. Never stop innovating.

Really? Cause they did they best to piss me off at every opportunity. Bring back tapes a mere 2 hours late and you have to pay what amounts to another days worth of rental fee. I don't mind paying a reasonable late charge, but to say that you lost an entire days worth of profit because I brought it back 2 hours late was a giant slap followed by spit to the face. That was the last time I rented to from them. That was was 2002.

So, no. I don't feel the least bit nostalgic about them. I wished for their demise. It came true and now I can't even bring myself to celebrate because their fall has been so pathetic.

I returned my Blockbuster card in an envelope with a letter I wrote in 2005 to the manager of a local Blockbuster store that charged me a $12 late fee for two VHS tapes I returned ON TIME, but they were not scanned in properly by their clerk. I refused to pay the $12 so they sent the bill to a collection agency. I cc'd the letter to the collection agency and advised them I would NEVER pay a late fee that was not valid and that and I had just opened an account with Netflix. I never heard another word from them. You may recall that Reed Hastings founded Netflix over just such an incident he experienced with Blockbuster. Good riddance, indeed.

I am surprised that others have not mentioned our secret for low cost movie watching (no, not Torrent), the LIBRARY.

Why do you hate freedom, you socialist fascist? :-)

Regarding local video stores, I used to frequent one nearby (Hollywood Express in Cambridge) even after signing up for Netflix; they had a good selection and friendly staff. However, I got to a point where I just couldn't cope with their ridiculous late fees anymore. The rentals could be quite reasonable -- $5 for two catalog titles for four days, some days -- but drop them off a minute past closing time the night they were due and the late fees were more than the rental. I eventually decided that, local or no, I couldn't support a business that seemed to depend on charging for customers' mistakes to generate profit. Shockingly, they're down to one location from four, now.

iTunes is a ripoff and often only offers a purchase option for new release movies. Netflix rarely carries new releases. Redbox carries most of the new releases but sometimes misses a few, this is especially the case for games.

It's hard to want to completely give up on BB when the alternatives haven't quite matured enough to completely replace it.

Before Blockbuster, little Mom & Pop video stores were everywhere. Most charged 99 cents a night. Then BB came along. The drove the little video shops out of business by overstocking new releases, then extended the minimum rental period and jacked up the price.

I know big stores can use their buying power to have an advantage over mom & pop's, but do you think Blockbuster really did anything that the smaller stores couldn't have also done? They made a thing of having more copies of new releases, it was an innovation at the time. I previously commented on a small shop that's outlived the Blockbusters, I think any mom & pop that bit the dust did so because they failed to adapt, just like Blockbuster is doing now.

Before Blockbuster, little Mom & Pop video stores were everywhere. Most charged 99 cents a night. Then BB came along. The drove the little video shops out of business by overstocking new releases, then extended the minimum rental period and jacked up the price.

I know big stores can use their buying power to have an advantage over mom & pop's, but do you think Blockbuster really did anything that the smaller stores couldn't have also done? They made a thing of having more copies of new releases, it was an innovation at the time. I previously commented on a small shop that's outlived the Blockbusters, I think any mom & pop that bit the dust did so because they failed to adapt, just like Blockbuster is doing now.

To be clear of the history, Blockbuster secured exclusive deals with multiple studios on new releases, allowing them to buy their movies heavily discounted (because of volume). A local mom-and-pop doesn't need or want to buy 10 copies of a movie; Blockbuster would routinely buy 10,000 such copies for the price of 1,000, then (post "rental-pricing") sell those through the next month.

It wasn't "Mom and Pop's" stupidity or intransigence which brought on their demise; it was the fact that they were small players and incapable of making massive volume discounted purchases.

To be clear of the history, Blockbuster secured exclusive deals with multiple studios on new releases, allowing them to buy their movies heavily discounted (because of volume).

Thanks for clarifying, however, if 10 copies of a movie is what differentiated Blockbuster and made them successful, why do you say:

Jet Tredmont wrote:

A local mom-and-pop doesn't need or want to buy 10 copies of a movie

It sounds like failure to adapt to consumer demands.

My understanding, was that in the 90s rental stores got movies free/very low cost, but shared rental revenue with studios. With DVD's the revenue sharing model fell apart, and studios tried to curb renting by making purchase price more competitive. I'm not sure what you've said holds water, I had a hard time finding any sources that support your statement. I know of smaller shops that survived the rise and fall of Blockbuster, so I have a hard time believing that it was anything other than poor management/failure to adapt that killed off smaller shops when Blockbuster was on the rise.

It was just a year ago that Blockbuster announced it would be offering a mailed DVD and streaming movie service (yes, à la Netflix) as a way to go head-to-head with the California company that has re-defined how we consume TV and movies.

Huh? We enjoy their mail service for several years now - I found it better and cheaper than Netflix.